Index in focus: Nasdaq 100 summer recovery at risk

The break allows us to decide what crucial levels to keep an eye on for the Nasdaq 100, one of our most actively traded indexes (US Tech 100). As can be seen in the chart below, the index increased by about 25% from its June lows to its top last week. However, sellers have recently forcefully driven prices down, leaving the Nasdaq 100 challenging a crucial historical support/resistance area around 12,900. Given that the 50-day EMA also happens to be located in the high 12,000s, the significance of that region for technical traders is increased. This level supported prices in March and April and served as resistance in early June after the index dropped below it:

It's interesting to see that after the selloff last week, our traders have switched back to a positive outlook for the index. Our internal data shows that during the entire previous week, about two-thirds of the outstanding volume on the StoneX Retail platforms was on the short side; this week, that percentage has switched to about 60% net long, indicating that our traders are generally anticipating a bounce in the index.

Will their (slight) bias prove to be accurate? Time will tell, but with the weakness in other risk assets and our anticipation of Chairman Powell's address on Friday, we wouldn't be shocked to see a break lower as September approaches. In that case, 12,200 would be the next support level to keep an eye on.

The index might return to its summer highs and the 661.8% Fibonacci retracement of the March-June dip at 13,700 in September if a definite recovery occurs from this important level.